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Tinker Spy Corp. has a high-yield junk bond with the following features:
Principal $1,000
Coupon 0% for years 1 through 5 and 10% for years 6 through 10
Maturity 10 years
The current interest rate on comparable debt is 10 percent. If you expect that the interest rate will be 8 percent five years from now, what is your potential gain or loss if your expectation is correct and interest rates are 8 percent after five years?
a) What should be the fair price of this asset today? b) Suppose the price of this asset today equals $4. Is there anything you could do to make arbitrage money? Show formally the arbitrage strategy.
What will be the annual net savings? Assume that the T-bill rate is 2.6 percent annually.
Compute each project's base case NPV, IRR, and payback. Explain the rationale behind each of these capital budgeting methods and your accept/reject decisions based upon each method. Include a chart showing the NPV profile for both projects.
This dividend is expected to grow by 25% for the next 3 years, then grow forever at a constant rate, g; and rs=12%. At what constant rate is the stock expected to grow after Year 3 ?
a. Formulate a linear programming model for this problem. b. Solve the model by using graphical analysis.
What is the amount of currrency in billions of dollars in the economy from the given info (assume no traveler's checks).
Shanken Corp. issued a 10-year, 8 percent semiannual bond 3 years ago. The bond currently sells for 96 percent of its face value.
What would you expect the nominal rate of interest to be if the real rate is 3.8% and the expected inflation rate is 7.4%? (Round to nearest decimal place)
Think about the status of your partnership and the potential of becoming one of the other forms of legal entity. What legal entity do you think would fit your.
Computation of internal rate of return of the bond and what was your internal rate of return
What metric is best used to reflect that a company's stock is expensive or cheap?
How much will you have saved after 6 years by contributing $1,200 at the end of each year if you expect to earn 11% on the investment? Am is still using break-e
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